High Point of Consumption Tax Could Send Players to Offshore Gaming Sites

Taxation has been a touchy subject for bingo operators in the UK. Land based bingo pays a higher tax rate than any other form of gambling.  Many internet bingo operators doing business in the UK pay no taxes to the government at all. Many gaming operators moved to jurisdictions where tax policies are more favorable. Popular jurisdictions include Gibraltar, The Channel islands and Malta. To advertise in the UK operators must be on a ‘white list’ of approved licensing jurisdictions. In May the Government, the Culture, Media and Sport Committee announced plans to tax and regulate internet gambling at the point of consumption. The Committee warned that placing too high a gambling tax on operators could boost illegal gaming operators.

In a report the Committee stated “We note that the Government’s prime justification for moving to a system of licensing operations on the basis of ‘point of consumption’ (POC) is that the existing regulatory system has significant weaknesses in areas such as transparency, consistency and the provision of information. The Government has stated that the ability to bring all operators serving UK consumers within the tax net is a consequence, but not the prime motivation, of the legislation. Whether or not this is the case, we regard it as a legitimate and desirable outcome of the change in the licensing regime that in future remote gambling companies doing business in the UK should be subject to the same taxation requirements, whether they are based onshore or offshore.”

Many bookmakers moved their operations offshore to avoid the tax on profits earned in the UK. Operators licensed in the UK are required to pay a 155 tax on gross profits. The Remote Gambling Association would like to see a 5% tax on gross profits. The Committee warned that “In setting a rate of tax, the Treasury should bear in mind the need to avoid setting it at so high a level that companies and their customers are driven into the black market.” Under the Gambling Act UK based gambling firms must hold a license in order to operate legally in the UK. Overseas operators have generally opposed the idea of a point of consumption tax.

Overseas operators claim that plans for a point of consumption tax are “unnecessary for consumer protection, might drive consumers to cheaper unlicensed operators and [are] principally intended to bring overseas operators within the UK’s tax regime.” In the past Hugh Robertson, the Minister for sport and tourism, said the point of consumption proposals would “bridge a regulatory gap” that exists in anti-corruption and consumer protection efforts.